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What is non-domicile status and who qualifies? | Tax and spending

What is non-domicile status?

A person who is registered as non-domiciled with HM Revenue and Customs does not have to pay UK tax on income gained overseas – including on company stocks or cash made from selling a second home – unless they bring their money into the UK or deposit it into a UK bank account. However, non-doms do still have to pay tax on money earned within the UK.

Who qualifies as a non-dom resident?

A person with non-dom status is someone who lives in the UK but has their permanent home outside the country. Their domicile – at least for tax purposes – is usually the country that their father considered their permanent home when they were born. That domicile may change if that person moves abroad and does not plan to go back.

Non-doms have to specifically apply for a tax exemption on foreign income of more than £2,000, meaning it is not an automatic designation for foreign-born residents or non-citizens.

Why is it controversial?

The rule primarily benefits the very rich, and has allowed those claiming it to avoid paying significant sums to HMRC.

A study by the London School of Economics and the University of Warwick found that more than two-fifths of people who earned £5m or more in 2018 had claimed non-dom status at some point since 1997.

Movie clapper board
Some of the highest earning non-doms work in the film industry and sport. Photograph: Igor Tokalenko/Alamy

Some of the highest earning non-doms work in the film industry and sport, including famous actors, directors, producers and Premier League football players, according to the report, which also found that 22% of top-earning bankers have benefited from the scheme.

Which big names have claimed UK non-dom status?

Some of the most well-known people who have reportedly claimed non-dom status include Roman Abramovich, the now-sanctioned Russian oligarch and owner of Chelsea football club, the steel tycoon Lakshmi Mittal and the media baron Lord Rothermere.

Lord Ashcroft, the multimillionaire and former deputy chairman of the Conservative party, and the former HSBC boss Stuart Gulliver were also reported to have used the non-dom scheme. The same applied to Sir James Goldsmith and his children, including the Conservative minister and longtime friend of Boris Johnson, Zac Goldsmith.

What about the chancellor’s wife?

It emerged on Wednesday that Rishi Sunak’s wife, Akshata Murty, claims non-dom status, allowing her to potentially save millions of pounds in tax on dividends collected from her family’s IT business empire.

Murty’s father is the billionaire founder of the Indian-headquartered company Infosys, from which she receives about £11.5m in annual dividends from her approximately 0.9% stake. Her non-dom status means she is not liable to pay the 39.35% tax applied to dividend payouts for UK-resident taxpayers in the highest income band.

Under current law, Murty will automatically be deemed domiciled after living in the UK for 15 years. Murty, who married Sunak in 2009, soon after they met while studying for a master’s in business administration at Stanford University in Silicon Valley, moved to the UK in 2015.

Her tax arrangement is legal and it is understood the chancellor declared his wife’s status to the Cabinet Office when he took office in 2018. A spokesperson for Murty has said she “has always and will continue to pay UK taxes on all her UK income”.

However, Labour has criticised Sunak for imposing tax increases on working households while his wife benefits from a scheme that has tended to help the wealthiest in the UK avoid national levies.

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